1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 REPORTER'S TRANSCRIPT 8 NOVEMBER 15, 2011 9 10 ITEM P3 11 CHIEF COUNSEL'S REPORT 12 ITEM P3.1 13 GUIDELINES ON THE STANDARD OF PROOF 14 REGARDING SALES AND USE TAX MATTERS 15 16 17 18 19 20 21 22 23 Reported by: Juli Price Jackson 24 No. CSR 5214 25 26 27 28 1 1 P R E S E N T 2 3 For the Board Jerome E. Horton of Equalization: Chairman 4 5 Michelle Steel Vice-Chairwoman 6 7 Betty T. Yee Member 8 9 George Runner Member 10 11 Marcy Jo Mandel Appearing for John 12 Chiang, State Controller (per 13 Government Code Section 7.9) 14 15 Diane G. Olson Chief, Board 16 Proceedings Division 17 Jeff McGuire Deputy Director 18 Sales and Use Tax Department 19 20 Todd Gilman Taxpayers' Rights 21 Advocate 22 23 24 25 ---oOo--- 26 27 28 2 1 INDEX OF SPEAKERS 2 3 NAME PAGE 4 5 Jesse McClellan 6 6 7 ---o0o--- 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 NOVEMBER 15, 2011 4 ---oOo--- 5 MS. OLSON: Our next item is P3.1, Guides on 6 Standard of Proof regarding Sales and Use Tax Matters. 7 MR. HORTON: Okay. Looks like we public 8 comments. 9 MR. McGUIRE: Good afternoon, Chairman, I'm 10 Jeff McGuire with the Sales Use Tax Department. With me 11 today is Todd Gilman, our Taxpayer Rights Advocate. 12 Today we're following up on a suggestion from 13 our September Taxpayers' Bill of Rights hearing 14 regarding standard of proof on audits. 15 And at this point I'd like to just turn it over 16 to Todd and he'll provide a summary of what that 17 suggestion was and the actions we're taking to address 18 that issue. 19 MR. GILMAN: Thank you, Jeff. 20 Members, at the September 20th, 2011 Taxpayers' 21 Bill of Rights hearing, Mr. Jesse McClellan, from 22 McClellan Davis, LLC raised an issue regarding the 23 standards of proof. 24 In subsequent correspondence, Mr. McClellan 25 recommended guidance on the standards of proof for sales 26 and use tax matters be provided by regulation and also 27 included in the audit manual. 28 The Taxpayers' Rights Advocate's office has 4 1 worked with the Sales and Use Tax Department and 2 Mr. McClellan regarding his recommendation. At this 3 time the Sales and Use Tax Department has agreed to add 4 comments to the audit manual regarding the taxpayer's 5 burden of proof. 6 Mr. McClellan has stated he is in agreement 7 with this -- with the Department's decision to add this 8 information to the audit manual. And it is not 9 recommended at this time that we add information to 10 Regulation 1698.5. 11 And, lastly, Mr. McClellan, myself and 12 Mr. McGuire spoke yesterday. And Mr. McClellan has 13 agreed to work with the Sales and Use Tax Department to 14 provide some follow-up language in regards to some 15 examples of what might be added to the audit manual as 16 far as standards of proof. 17 That concludes my update. If you have any 18 questions, we'd be happy to answer them now. 19 MR. HORTON: Thank you very much. 20 We're going to hear from Mr. McClellan, he's 21 here. 22 ---o0o--- 23 JESSE McCLELLAN 24 ---o0o--- 25 MR. McCLELLAN: Thank you, Mr. Chairman and 26 Members of the Board. I just wanted to take the 27 opportunity first to thank the Chairman and the Members 28 for suggesting action on this and also to thank the 5 1 Advocate's Office and Mr. Gilman and the Department and 2 Mr. McGuire for taking that action. 3 And as Todd stated, we have been in contact and 4 will be working directly with Advocate's Office and the 5 Department in an effort to potentially expand upon 6 what's suggested at this point to be amended to the 7 audit manual. 8 MR. HORTON: Okay, thank you very much. 9 All is well, good. 10 MR. McCLELLAN: Thank you. 11 ---o0o--- 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, JULI PRICE JACKSON, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 NOVEMBER 15, 2011 I recorded verbatim, in shorthand, to 10 the best of my ability, the proceedings in the 11 above-entitled hearing; that I transcribed the shorthand 12 writing into typewriting; and that the preceding pages 1 13 through 6 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: DECEMBER 8, 2011 17 18 19 ____________________________ 20 JULI PRICE JACKSON 21 Hearing Reporter 22 23 24 25 26 27 28 7